To The Moon

Recently, the divergence in the U.S. stock market becomes more extreme. What happened? The $NASDAQ(.IXIC)$ rose over 3% last week, while the Dow Jones Industrial Average fell. This phenomenon has only occurred five times since the bursting of the dot-com bubble 20 years ago. Meanwhile, on Thursday and Friday of last week, the number of stocks on the New York Stock Exchange hitting 52-week lows exceeded those hitting 52-week highs. However, during these two days, the Nasdaq 100 index rose by over 2%. These two signals send different messages but have historically appeared in bear markets or in the early stages of bull markets where bullish sentiment is not yet firm. Overall, investors lack confidence in the market, and a large amount of capital has flowed into the hot field of artificial intelligence. As a result, the stock market gains have been concentrated in a few large technology companies. Non-FFANG, but Fabulous Seven Bank of America strategist Michael Hartnett refers to these stocks as the "Fabulous Seven": $Apple(AAPL)$, $Alphabet(GOOG)$, $Alphabet(GOOGL)$, $Microsoft(MSFT)$, $Amazon.com(AMZN)$, $Meta Platforms, Inc.(META)$, $Tesla Motors(TSLA)$ and $NVIDIA Corp(NVDA)$. Since the beginning of the year, the market value of these seven major constituents of the Nasdaq 100 index has increased by $3.35 trillion, while the remaining 93 constituent stocks have only increased by $635 billion. In other words, the "Fabulous Seven" contributed 84% of the $4 trillion market value added to the index in 2023. Additionally, the market value added by Apple and Microsoft exceeded the sum of the other 93 stocks. Image AI wave Although market value growth is concentrated in a few large-cap stocks, the share prices of some software and chip companies have also surged in May, driven by the AI wave. Chip manufacturer $Marvell Technology(MRVL)$ has seen its stock price rise by 65% this month, with a 30% increase in just one day last Friday. The chipmaker expects its AI revenue for fiscal year 2024 to at least double. Cloud-based security company Zscaler Inc. $Zscaler Inc.(ZS)$ has seen a 45% increase in market value this month, ranking second in the Nasdaq 100 index. $Advanced Micro Devices(AMD)$ has seen a 42% increase in its stock price in May. Among the Nasdaq 100 constituents, NVIDIA has experienced the largest gain this year and is also among the top performers in May, with its market value increasing by over $500 billion. Apple and Microsoft are close behind. The next four stocks with the highest market value growth are Alphabet, Amazon, Meta Platforms, and Tesla, with subsequent increases significantly lower. Citigroup strategists recently stated that the engine driving the U.S. market now is AI, and the sensitivity of this investment theme to interest rates will further increase. In other words, the AI concept currently traded is synonymous with the Federal Reserve concept. Hartnett of Bank of America also mentioned last week that the lackluster macro narrative in 2023 signifies the heated micro narrative of AI.